CONGRESS

SUPERVISION AND OVERSIGHT
District 9 • The Federal Home Loan Bank of Dallas 28
At year-end, the FHLBank of Dallas was the smallest
FHLBank, with assets of $42.1 billion. Its balance
sheet consisted of 58.8 percent advances, 0.13 percent
mortgages, and 40.8 percent cash and investments.
The FHLBank held $24.7 billion in advances, $17.2 billion
in cash and investments, and $55 million in mortgage
loans. MBS investments totaled $6.6 billion, of which
$122 million were private-label MBS. Advance balances,
which had been in decline since 2008, increased approximately
$5.8 billion from the prior year-end. Funding
through consolidated obligations totaled $38.6 billion
and comprised 53.3 percent discount notes and 46.7
percent bonds. Consolidated obligations with a remaining
maturity of less than one year totaled $26.4 billion.
The FHLBank reported net income of $67 million for
the year, the lowest among the FHLBanks. The return on
assets was 0.16 percent, which was the second lowest. Net
interest income totaled $122 million. The FHLBank’s net
interest spread was 0.27 percent, which was tied for the
third lowest of all FHLBanks. The FHLBank’s yield on
advances was 0.61 percent (third highest), and its cost of
funds on consolidated obligations was 0.25 percent (the
lowest). Operating expenses of $71 million were the sixth
highest of any FHLBank in nominal terms, but ranked second
highest when compared to total assets at 0.17 percent.
The FHLBank had 835 members at year-end 2015: 625
commercial banks, 65 thrifts, 104 credit unions, 36 insurance
companies, and 5 community development financial
institutions. The FHLBank’s ten largest borrowers held
38.5 percent of total advances.
At the time of its April 2015 examination, FHFA had
supervisory concern about the FHLBank. The examination
observed that the FHLBank continued to have a low level
of advances and above average operating expenses relative
to assets, although strategies employed by management
to increase advances and reduce operating expenses are
coming to fruition. The examination also determined that
operational risk management continued to raise concerns,
especially in asset management and disaster recovery,
ongoing management turnover persisted, and credit modeling
needed improvement. Further, the examination
identified weaknesses in the FHLBank’s handling of suspicious
activity reporting and unsecured credit, as evidenced
by regulatory violations in these areas.
The FHLBank’s regulatory capital ratio was 5.5 percent,
which was the fifth highest in the FHLBank System, and its
regulatory capital was comprised of $1.5 billion in capital
stock and $762 million in retained earnings. Its retained
earnings were equivalent to 154 percent of its risk-based capital
requirement. The FHLBank’s market value of equity was
149.6 percent of the par value of its member capital stock.
28
This summary reflects conclusions made at the time of FHFA’s 2015 examination of the FHLBank of Dallas supplemented by year-end financial information.
REPORT TO CONGRESS • 2015 39